International Political Economy

Lecture 5: Globalization and Development

2026-02-06

Today

  • Globalization and trade integration
  • Institutions for free trade: GATT/WTO
  • Did institutions increase trade flows?
  • What are the consequences of trade integration (economic and political)?

Globalization

What is globalization?

What do you think of when you think of “globalization”?

Globalization is the process of increasing interdependence and integration among the economies, markets, societies, and cultures of different countries worldwide. This is made possible by the reduction of barriers to international trade, the liberalization of capital movements, the development of transportation, and the advancement of information and communication technologies

Wikipedia

What is globalization?

Globalization is a complex phenomenon which involves the exchange of goods, services, information, technology, and people

Many of these components have a dedicated module

In this module, we will focus on the trade component of globalization

Globalization and Trade

Globalization and trade

Growth of global trade

Globalization and trade

Waves of globalization

Globalization and trade

Bilateral trade

Geography and trade

Distance and trade

Geography and trade

Distance and trade

Geography and trade

Not just physical geography, but how “fast to reach” a country is

Pascali (2017) shows that the first wave of globalization (1870-1913) was facilitated by the introduction of steam engines

They drastically reduced shipping times for merchant ships, which previously could only rely on wind

Studies that try to do causal inference on trade use some exogenous factor (related to geography) that reduces trade costs between two countries

For instance: distance, or changes in travel times as determined by changes in transport technology

Globalization and trade

Class activity

The rise of China in the world economy

China’s trade partners

The rise of China in the world economy

Class activity

The rise of China in the world economy

Chinese import penetration in the US

Source: Autor, Dorn, Hanson (2013)

Institutions for Free Trade: GATT/WTO

Did the GATT/WTO increase free trade?

Goldstein, Rivers, and Tomz (2007) study the effects of GATT/WTO on trade between countries

Recap of the study:

  • What is the motivation for their study? Is there a gap or puzzle they want to address?
  • What is their argument regarding the effect of GATT/WTO?
  • What is their research design?
  • What are the units of analysis?

Did the GATT/WTO increase free trade?

From Goldstein et al (2007)

Did the GATT/WTO increase free trade?

Do you think this study has broader implications for understanding the effects of institutions?

The Effects of Trade

Economic effects of trade

What do you think are the effects of trade on:

  • Growth?
  • Inequality?

Economic effects of trade

From Pascali (2017)

Trade and democracy

Democracies over time

Source: Our World in Data and V-Dem

Does trade integration lead to the spread of democracy?

Tabellini and Magistretti (2025) study this question

  • What is their research question?
  • What is the logic of their design? What is the “treatment”? What is the “instrument”?
  • What are the mechanisms that they suggest for the result and the ones they say they rule out?
  • What are the identification assumptions? Do you find them plausible?

Class activity

What can be the negative consequences of globalization (trade integration) on the economy? And on democracy?

Next

  • Understanding reactions to globalization: winners and losers
  • The backlash against globalization today
  • The rise of the radical right in Western democracies